It is important to recognise the distinct stages in any transaction. Taking a merger as an example, the first stage is where an approach is initiated or received, the second where initial talks take place, the third the decision in principle by the Board to merge. These stages often only involve Board members and a handful of senior staff and are done on a strictly confidential basis. Some major elements of due diligence may be carried out at this stage – to check that there are no major barriers to the merger – but no detailed work takes place.
Once a decision in principle is taken and there is a public announcement of the potential deal, this is when the work really starts! A merger programme is set up, usually involving people from every department within the organisation, working towards the signature of the legal documents some months later and putting in place all the operational needs for day 1 of the new organisation. Some of the key areas in the merger programme are:
- Legal agreements, including the transfer agreement and any subsidiary agreements
- All external approvals required e.g. regulators, members, funders
- Due diligence on income and expenditure, assets and liabilities, staff, contracts, funders,
- policies etc
- Business plan for the new organisation including the vision and values
- People issues, TUPE and staff transfers, terms and conditions, pensions and potential
- liabilities, sites and offices
- Communications plan for external and internal audiences
Board member involvement is crucial not only in the initial stages, but throughout the process, to oversee the merger programme and resolve serious problems as they arise. Negotiations are often required in the latter part of a transaction and it is only Board members or trustees who can make decisions about the strategic future of the organisations concerned. A useful approach is to have a small sub-group of trustees who can carry out detailed negotiations when required during the process.
So what gives a merger more chance of success?
- Clear objectives and strategic rationale followed through
- Recognition of the importance of developing a shared culture and value set
- Regular communication – you can never have enough
For more information on managing mergers, have a look at the leaflet Dianne produced for ACOSVO – The Association of Chief Officers of Voluntary Organisations. Managing Mergers in the Third Sector Final 2010
Contact: Dianne Haley, Director, Haley Associates
T: 07962 230898
The views and opinions expressed in the blogs are independent and do not constitute endorsed advice or necessarily reflect the views or position of Social Firms Scotland or the Acquiring Business for Good Programme.